Letter to BS: RBI displaying cautious optimism by keeping all options open

With reference to the editorial “Ahead of the curve” (August 2), it was rightly said in the early 90s when the process of globalisation was initiated and economic integration started gaining ground thereafter that they will throw open greater uncertain times ahead. The pain and the anguish in terms of confronting the enormous uncertainties were felt in the RBI’s monetary policy review on August 1. The high level of uncertainty has added to the market complexities. Demand, growth and inflation are the buzzwords today. 

While there is continued pressure on inflation front, other critical issues like ensuring market stability, rising global trade war, weakening of a rupee with its adverse effects on imports and exports, financial turbulence and geo-political tensions, growing uncertainties in the economy including the future prospects of monsoon and its distribution across the country, and fiscal worries have been adequately factored in to arrive at any logical conclusion. While the growth is picking up steadily, the rate hike by 25 bps with a neutral stance therefore goes to indicate that RBI is displaying cautious optimism by keeping all the options open going forward. The future policy review will be subject to data emanating that time. 

In a nutshell, it is an intelligent and a flexible policy review. Post review, for effective and fuller transmission of monetary policy the interest rate hike by the banks should come, sooner than later.

Srinivasan Umashankar,  Nagpur

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